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Integrating the macro (the big picture) with the micro (the earnings picture at specific companies) will be crucial to making big money this year. Where do the macro and the micro intersect? To me, the best diagnostic tool is still Cramer's Stress Index, which I came up with last week. It continues to roar. To reiterate, the Stress Index measures how a group of securities that needs financing are faring. As the economy weakens, people expect the Fed to ease.

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As the Fed eases, it frees up capital for those who need it. Nobody needs it more than the telecom companies that have to pay off existing debt and build out their networks if they are going to survive. If they survive, then the companies that supply telcos equipment, the Nortels (NT:NYSE - news - boards) and the Lucents (LU:NYSE - news - boards) and the Ciscos (CSCO:Nasdaq - news - boards) and the JDS Uniphases (JDSU:Nasdaq - news - boards) will prosper. If they don't, if the Stress Index falls, all of these companies will miss their numbers. All of them. That's the capital expenditure argument in a nutshell.

(Be sure to look at the closing prices of the stocks in the Stress Index, and also to review the changing value of the portfolio over time.)

Cramer's Stress Index
DATE	INDEX Div Factor=5000	EVENT
16-Jan-01	136.40
12-Jan-01	139.04
11-Jan-01	141.19
10-Jan-01	127.33
9-Jan-01	110.00
8-Jan-01	105.52
5-Jan-01	109.22
4-Jan-01	112.72
3-Jan-01	103.30
2-Jan-01	81.18	Fed Ease
29-Dec-00	87.55
28-Dec-00	90.45
27-Dec-00	88.52
26-Dec-00	88.20
22-Dec-00	91.64
21-Dec-00	86.38
20-Dec-00	93.42
19-Dec-00	100.00	Fed Changes Bias

So, how do the micro and the macro interact on a given day? Today's a perfect example. First, the micro: John Chambers in China says that he doesn't think Cisco is immune from the slowdown for the next two quarters, but things can pick up if the Fed pushes rates down. Then -- switching to the macro outlook -- the Philly Fed index plummets today, a certain sign that things keep getting weaker, and an action point that will bring back the talk about a 50-basis-point interest cut in January. Then back to the micro: A bet that the short rates are going to come down might entice a stock and bond player at an institution to buy some bonds that could appreciate when rates go down. That demand can be met by these telcos that want to finance. Then, back to the macro: These telcos get the financing because the Fed is behind you, allowing you to take the risk with the bonds these telcos issue. And, once again, back to the micro: Cisco will make its numbers down the road. If Cisco can make its numbers down the road, then you might want to be long Cisco or think about buying it if it drops from here.